In the last 70 days, the economy has trended toward meh. How does the administration see the big picture about the economy?
Two months ago, I passed along 13 graphs
from the Treasury Department that summed up the White House's case for
the economic recovery. Love it or hate it, I thought, it was important
for both sides to deal with the administration's economic arguments. Well, Treasury has released a second baker's dozen of graphs, with this batch focusing on the growth story since 2009. I'm passing these along not as a matter of marketing -- Hey, look how right the administration is about everything! -- but rather as a keyhole into the big and important debate about the recovery and the administration's role in speeding it up or holding it back.
You can find some of my own conclusions and observations at the bottom. The last time I posted Treasury graphs, a good debate broke out in the comment section, so I'll join you there, if you make a good point, or pick a good fight.
(1) Growth, Oil, and the EU. U.S. growth over the last two years has occurred in the face of two strong headwinds: the euro crisis and high oil prices. These factors make it difficult for any administration to celebrate break-out growth, but they're also factors that we're just going to have to get used to. High oil prices aren't a random phase, they're simply the future. Weak growth out of Europe isn't a quarter-to-quarter phenomenon, it's the new normal for Europe, at least for the next few years.
(2) What's Growing? Admin talking point: "Exports have accounted for 40 percent of GDP growth since the bottom of the recession. Competitiveness! Winning the future! Go USA!" Opponent talking point: "Sure, that's only because your denominator, GDP growth, is so small!" Both sides have a point. Equally notable is the decline of government consumption and gross investment. Total government spending has grown under Obama, but all the growth has occurred in government transfers to support consumer and business spending, so this expansion is showing up in the blue and red columns.
(3) We Are Number One! (Ahem, among a select crop of the developed world, that is) Is the U.S. really beating Germany in GDP growth? It depends on when you decide to blow the whistle. Trough to peak, Germany has recovered faster than us. But since Germany's trough was deeper, its recovery appears shallower in graph 3. Germany's case is also not helped by the fact that more than half its exports go to the EU, the UK, and Japan, all of which are having somewhat miserable recoveries.
(4) The Great Deleveraging Game. Graph 4 is a little complicated. Go back up there, take a look at the chart in the bottom left-hand corner, and then let's finish this paragraph ... Okay, you're back, so that chart is what a great deleveraging crisis looks like. The household savings rate, which fell off a cliff in 2005, scaled a mountain in 2008. Not good news for a recession! When families pull back, the private sector shrinks. This is exactly why I tend to think that fiscal stimulus is so necessary in a so-called "balance-sheet" recovery. Without the U.S. government cutting taxes and directly spending to fill the vacuum left by households, the economy would have declined by even more than it did.
(5) The Incredible Shrinking Government. We can debate whether smaller total government is good for the economy in the long-term. But there's really no question that massive state and local cuts have slowed growth and increased layoffs at an awfully inconvenient time for the economy at large.